Oil was up on Wednesday morning in Asia, holding onto its gains from the previous session as well as hitting a three-month high, after the American Petroleum Institute (API) predicted a surprise draw in crude oil supply on Tuesday.
Although small, API's prediction of a 500,000 barrel- draw for the week ended May 29 gave the black liquid a boost after the previous week’s estimate of an 8.7-million-barrel build.
- Brent oil futures rose 1.56% to $40.25 by 9:49 PM ET (2:49 AM GMT) and WTI futures jumped 2.42% to $37.70.
- Brent oil futures climbed 3.87% and WTI futures gained 2.7% during the previous session.
Investors will also see whether OPEC+’s meeting, expected to take place on Thursday, will extend the current production cuts that will end this month.
“Most likely, OPEC+ could extend current cuts until Sept. 1, with a meeting set before then to decide on next steps,” Citi’s head of commodities research Edward Morse told CNBC.
There is also optimism that the slow but certain global economic recovery from COVID-19 will continue boost demand.
A Capital Economics note said, "As virus-related lockdown measures continue to be lifted, we expect that demand will gradually recover,” but also estimating that 2020’s average global oil consumption will fall to just under 92 million bpd compared to 2019’s 100.2 million bdp average. Oil is likely to end up in "a small deficit later this year, which should provide some additional support to prices," the note added.
But this optimism will also have to contend with COVID-19's reality of over 6.3 million global cases globally, fears of a second wave, and no cure.